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Trade Compliance

Importance of Harmonised Classification

  • By Madhav Mantri
  • May 08, 2023

Harmonised System classification

For the smooth functioning of trade across countries, it is important to classify goods and products which are being traded. HS codes are used by governments, customs authorities, statistical organizations, regulatory bodies, and traders. As an importer/exporter, you are legally bound to classify your goods correctly and enter the correct HS code in your shipping documents.

Importance of Harmonised Classification

The main reasoning behind the classification of tangible products is that it ensures.

  • 1. Right amount of duty is being paid by the party.
  • 2. The basis of the rule of origin of the product showcasing the natural source.
  • 3. The government decides different tariffs and trade policies regarding the product.
  • 4. That the customs control procedures are followed, and risk compliance assessment is facilitated.

Failure to report correct Harmonised Classification

Incorrect or failure to report correct classification can lead to non-compliance, penalties, delays on borders, seizure of product(s), and even lead to denial of trade privileges. The exporter must provide correct classification, which can be tricky and complicated and includes risk.

  • 1. Samsung India Electronics was issued a show-cause notice by the Directorate of Revenue Intelligence and asked for the reasoning from the Indian subsidiary of a Korean Company for alleged custom duty evasion due to the wrong classification of their several electronic products.
  • 2. Toyota Tsusho Private Limited provided the wrong classification for leather cut pieces under tariff heading 4115 20 90 and claimed exemption of payment of tax duty. The issue pertained to incorrectly misclassifying networking devices to avail exemptions under different regulations. Such failure attracted a hefty penalty on Toyota Tsusho Private Limited.
  • 3. A Special CBI (Central Bureau of Investigation) Court had sentenced two customs officials and four other individuals to rigorous imprisonment along with a fine for custom duty evasion. A fine of ₹5.3 crores and 7 years of rigorous imprisonment to the assistant commissioner of Customs. The cause of action was the malicious intent of customs officials who forged custom documents for availing of 100% duty exemption for the import of fabric products.

4PL consultancy as a firm has designated resources for Harmonised System Classification of products Our team of highly skilled and talented customs brokerage specialists has the required expertise to provide clients with high-quality HS code classification services at highly reasonable rates. We make use of our domain expertise and cutting-edge technologies and infrastructure to deliver results within a quick time.

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